Answers some of the most commonly asked questions about Nucleation Capital.
Nucleation Capital is a new venture capital fund that invests in private ventures that enable us to reduce new greenhouse gas (GHG) emissions and draw down on existing free GHGs, so that we can build the low-carbon economy that we need to prevent runaway climate change. We are focused primarily on less-known technologies that punch above their weight, namely advanced nuclear and deep decarbonization. Both sectors will likely see huge growth as the global pressure to decarbonize mounts. Our investments will thus help to nucleate what we call the “carbon-managed” economy, where we either eliminate emissions from current energy and industry activity or match emissions with an equal or greater amount of carbon capture. Climate change, the worst crisis ever faced by humanity, is simultaneously one of the greatest investment opportunities. Nearly all of the $6 trillion energy market current served by extracted fossil fuels needs to be replaced by clean energy sources. Nuclear power, despite what people think, currently generates more than half of all of our clean energy: next-gen nuclear is preparing to dramatically hoist our stressed grids into the 21st Century with a wide range of new energy generation designs that will meet humanity’s distributed and geographically diverse and growing energy needs.
Primarily because the world’s focus on deploying renewables has failed to yield any meaningful reduction in global emissions. To date, what little emissions reductions we have achieved have come predominantly from natural gas taking market share from even dirtier coal. Yet natural gas’ growing market share spells disaster for climate and us. Only nuclear deployments have the reliable clean power that can retire large fossil fuel plants. Importantly, fourth-generation nuclear technologies will be able to provide not just traditional grid base load power but also industrial process heat, off-grid power, marine power and other “hard-to-decarbonize” energy challenges that we face, for which there are no other good solutions.
Yes. Nucleation Capital is accepting new investors on a rolling basis through our online investment platform at AngelList. We have deployed as a rolling fund, which allows accredited investors to set their own investment level (as low as $5,000 for each of four quarters) and participate for as many quarters as they might like. Qualified investors, such as family offices and endowments, are now able to participate in our fund with much lower levels of committed capital than is required by a more traditional fund, thus reducing their risk of participation in these new sectors. Subscribers pay out their committed capital over a selected number of quarters, through our quarterly “subscription” model, thus easing investment cashflow considerations. Learn more at our AngelList fund portal.
Like most traditional ventures funds, Nucleation Capital will operate under an exemption to SEC registration rules. This limits us to being able to accept investments solely from accredited and qualified Investors. Unlike many traditional venture firms which have six-figure minimums, however, we are able to accept smaller capital commitments from a greater number of investors, allowing for many more investors with assets that meet the accreditation threshold to afford to participate in our fund and gain investment exposure to these key sectors of innovation.
We will invest in early to late Series A and B rounds for incorporated ventures operating in the U.S., Canada and the U.K., which are developing scalable technological solutions to climate change in the areas of clean energy generation and storage via fission, fusion, molten salts, hydrogen and other chemical processes. We also invest in ventures that reduce, capture, utilize or synthesize emissions (CCUS) such as carbon dioxide, carbon monoxide, methane and other GHGs along with related supply chain, materials, software or services for CCUS deployment. Lastly, we will invest in improvements to existing or new energy generation, energy storage, energy transmission technologies, including grid optimization, waste treatment, testing, reprocessing and innovative applications or materials related to these areas.
The traditional cleantech area has an abundance of investors competing for the most attractive consensus deals but these are all “incremental” opportunities and very few are likely to yield high returns. In contrast, the advanced nuclear and CCUS sectors have an abundance of attractive, if significantly higher risk, “black swan” opportunities yet an astounding dearth of knowledgeable investors willing to evaluate and selectively invest in these extraordinary ventures.
Many venture investors take their cues from environmental advocates who favor and hype renewables, which technologies have garnered both preferential energy policies and favorable tax treatment. These have temporarily improved the investment prospects for renewables. In contrast, nuclear energy, which still produces the vast majority of our clean energy, has had to contend with discriminatory energy and tax policies, as well as regulatory hurdles and frequent repetition of misrepresentative and even deliberate distortions of its capabilities and safety performance. Given the mainstream perception that nuclear is not accepted as a clean energy solution (despite the fact that the Biden Administration is strongly supporting both advanced nuclear and CCUS), there is an opportunity to take advantage of the lingering information arbitrage that keeps many investors away from this market.
Absolutely. An “impact” investment is one made with the intention of generating a positive measurable social or environmental impact alongside a financial return. We are investing with purpose specifically in those companies working to directly reduce carbon emissions from our use of energy as well as from the atmosphere, where emissions are directly causing climate change. Technology like nuclear energy—which produces no carbon emissions from energy generation—most definitely qualifies as its use generates huge amount of reliable energy without adding to global warming. Our fund thesis directly addresses solutions with the potential to benefit 14 of the 17 Sustainable Development Goals. Most importantly, we aim for techologies that will provide affordable and clean energy (#7), sustainable cities and communities (#11), climate action (#13), clean air and environment for good health and well-being (#3), the end of fossil extraction and less need to sacrifice our open spaces, so better life on land (#15), job creation for decent work and economic growth (#8), healthier life below water (through reduced acidification of the oceans) (#14) and, via education and outreach, greater partnerships for the goals (#17) of ending emissions while providing abundant energy and restoring the health of our climate.
Both Nucleation Capital, as a fund, and the ventures that we plan to invest in, reflect high degrees of conformance with ESG metrics. ESG metrics evaluate the “Environmental, Social and Governance” characteristics of entities. Environmental factors typically include: climate impacts, carbon emissions, energy efficiency, air and water pollution, waste management, water scarcity, biodiversity and deforestation. Social factors evaluate: gender and diversity policies, human rights, labor and employment standards, customer and community relations. Governance metrics include: board composition, executive compensation, lobbying activity, political contributions and anti-bribery and corruption policies. As a fund, Nucleation Capital is majority woman owned and led, and serves to improve gender equality. Our focus as a climate fund is on addressing the “E” component, also relatively rare, by increasing sources of clean energy, reducing carbon impacts and air pollution in particular. Furthermore, we will evaluate our ventures on their social and governance performance and plans, as we recognize that for next-generation nuclear to be broadly embraced by the communities it serves, companies will need to operate at the highest levels of customer accountability, environmental justice and community transparency.
No, we are targeting standard venture capital returns. Climate change poses an existential risk to humanity and Nucleation Capital is focused on solving that, through the commercialization of scalable, cost-effective technological solutions. Yes, there are risks to technology investments but these pale against the risks of failing to meet decarbonization timeframes. The world and the U.S. are ready and motivated to solve this problem and know that there is a limited window to act—so there are many groups focused on getting critical solutions to market. We believe the urgent need to address climate change and the “whole of technology” approach that the Biden Administration knows must be taken if we are to meet our carbon reduction goals, more than compensates for the additional risks encompassed by our thesis.
Traditional venture capital firms do need to avoid any suggestion of making a “public offering” if they don’t want to do a full registration statement. Fortunately, we are able to operate under a less restrictive exemption that allows us to make public-facing statements, in large part due to the requirement that all of our investors register on our technology platform and prove their status as accredited investors.
This is not a blind fund and we will be reporting on our investment activities to our investors. We will provide a quarterly update that contains non-confidential information about the investments we have made. As we are not asking our investors (LPs) to sign NDAs and cannot expect others to protect confidential information, we will draw the line on only reporting on information that does not risk violating any of the confidentiality provisions that we have agreed to with our portfolio investments. With those limits, we will report as much as possible on our investment activity and the performance updates of the companies within our portfolio.
No. With the rolling fund structure, subscribers only pay the amount of their subscription, so there are no further capital calls for fees, which are typical for traditional venture capital. This means that the LP’s only requirement is to fund their quarterly subscription amount.
There are two types of fees collected by AngelList. They deduct fees from the principal amounts paid by the LP to pay Nucleation Capital’s 2% management fee. Additionally, AngelList deducts a further fee to pay itself for our use of their platform. AngelList charges fifteen basis points (0.15%) on total subscriptions annually for their services (or a minimum of $20,000 per quarter). While most all other rolling funds charge that fee to their LPs by deducting that fee from LP principal, Nucleation Capital is covering that fee itself, so Nucleation has directed AngelList to deduct its fee from our 2% management fee, resulting in a net fee to us of 1.85% (rather than 2.00%). Nucleation Capital also will cover meeting AngelList’s minimum quarterly fee of $20,000 per quarter for up to four quarters, so our LPs are not subject to additional fees, while we are in our first year of operations.
Limited partners do not have the right to participate in making any management decisions about the fund but also none of the responsibility. This preserves both the LPs limited liability as a partner coupled with the right to receive highly favorable tax status for their invested capital. This is why that structure is favored by professional LPs, whose primary responsibility is in the selection of GPs. It is the standard structure favored by the big boys in venture capital and applies equally to traditional and rolling funds.
Ten years is the standard term for a venture capital fund and this is used because it typically takes many years for a young venture to build up its operations and revenues and substantially increase its value. In the event that there is a sooner liquidity event from the IPO or sale of a venture that we’ve invested in, we will distribute those proceeds, sometimes in cash but usually in equity, back to the LPs as soon as feasible (given lock-up provisions and other sale restrictions). If there is a recognized loss, that will also be “distributed” via K1 tax forms as soon as feasible. At the end of the term, the disposition of invested assets which have not had a liquidity event or gone bust but are rather still building value will be evaluated and discussed by the GPs in consultation with the LPs. Typically the fund term can be extended by a year or two or alternatively those securities can be traded on a secondaries market, should the LPs require liquidity.
About Rolling Funds
Rolling funds are a relatively new structure for a venture capital fund which leverages a sophisticated technology platform to create a subscription model vehicle for raising and deploying pooled capital. As such, rolling funds expand the boundaries of the VC industry, creating opportunities for new, innovative managers to offer unique funds and for new investor communities to be able to access such funds. In this way, rolling funds are a form of democratization both because they enable more diverse general partners (GPs) to enter the market and because they make it possible for a broader group of accredited investors to serve as limited partners (LPs) by participating in what was previously a very exclusive asset class. The rolling fund has emerged as a result of changes in the law established by the “Jumpstart Our Business Startups (JOBS) Act” of 2012. The technology was developed by AngelList and first introduced in 2020.
Rolling Funds utilize a unique technology platform that faciliates a novel legal structure in which the fund is comprised of a series of consecutively-formed quarterly funds. This allows the fund manager to offer investors participation through a subscription to match the investor’s participation preferences. Unlike investing in a traditional venture fund, a Rolling Fund provides:
- A regular quarterly capital investment schedule rather than a one-time commitment with irregular capital calls.
- Flexible subscription terms, allows investors to select their own quarterly participation level and change it over time.
- An “evergreen” structure, with continuous access for new investors to join subsequent quarters.
- The bulk of fund administrative tasks are automated, freeing the fund managers to focus on finding great companies, investing, communicating with investors and supporting portfolio ventures.
- Reduced closing legal fees, making it economical to accept investors wishing to participate at far lower capital levels than are feasible for a traditional fund.
- Online accreditation of all subscribers, ensures that the fund qualifies for the rule 506(c) exemption to fund registration, enabling the fund to conduct broader outreach to the public.
- Substantially lower investment minimums means that rather than just the top 20% of accredited investors being able to access venture capital funds, the bottom 80% of accredited investors can also afford to allocate some of their assets to this class.
- Majority funding from diverse knowledgeable individuals rather than large institutions like pension funds or foundations, whose conservative investment decision-making protocols have long served as a preserver of the fossil fuel status quo.
LPs must subscribe to a Rolling Venture Fund through the AngelList platform. There are several steps to subscribing: 1) Let us know you are interested. 2) Receive our fund presentation and get answers your questions. 3) Request the fund subscription link, review and approve the fund’s legal documents and select your subscription level. 4) Determine your method of funding.
If you are new to AngelList, you’ll need to go through AngelList’s fraud prevention process. U.S. investors can simply enter a few pieces of information (Legal Name, Address, Social Security Number), and AngelList will verify your identity. If you’re a non-US investor, you’ll also need to upload a valid identity document from your country of residence. Then to invest in the Nucleation Capital rolling fund, you will need to submit your proof of investor accreditation. This may involve submitting account statements, tax returns or certifications from an investment advisor.
Investors (the Limited Partners or “LPs”) pay nothing to register as an investor on the AngelList platform or to access the Nucleation fund portal to review the fund documents. If you choose to go ahead and participate in our rolling fund, however, you will pay fees to compensate us as the fund managers and our fee includes the component of our costs associated with our use of the AngelList.
Yes, they can. There is tremendous flexibility built into this plattform, allowing investors to select the number of quarters and the amount they want to invest. LPs may cancel, increase or decrease their subscription at any time. Investor subscriptions are automatically renewing, unless cancelled.
Subscribing LPs get exposure to all deals in the quarters they’re subscribed to. For example, if an LP joins the fund in Q5 and remains subscribed for the next three quarters, then they would get exposure to the investments made in Q5, Q6, Q7, and Q8 but not Q1, Q2, Q3, Q4 or Q9.
You will receive annual tax documents for any investments that receive income in a given tax year. Tax returns and K-1’s are only required to be filed with the IRS if there is taxable income or loss to report. If none of the investments that were made during the period you subscribed generated taxable income or loss, no K-1 will be required.
Nearly all venture funds operate with a ten-year term. The reason for the long term is that the capital that is invested is put to work in private ventures that are illiquid investments which will not return that capital until there is a “liquidity event,” such as an acquisition, an IPO, a merger or an agreement to deploy a SPAC. It can take many years for even the most succesful private ventures to achieve “liquidity.” Of course, not all investments take that long to mature, so there is the prospect of getting funds distributed to investors prior to the tenth year, should a venture experience that liquidity event sooner. Needing to have long-term investment endurance is one reason why many smaller investors choose not to invest in venture capital.
About Nuclear Energy
In some sense, all of our energy comes from the Big Bang, which created stars and planets. Mankind has been fortunate that we’ve been gifted with special minerals with the ability to fission. A single fission event has been found to produce 200,000,000 electron volts of energy carbon free versus 2 electron volts produced by the burning of a single hydrocarbon mocule, that merely breaks a chemical bond but releases a molecule of CO2. We hope this graphic helps explain the origins of energy.
We choose to invest in the innovations happening in nuclear because we see how amazing these innovative ideas are and how incredibly critical the need for firm clean energy is in the context of a rapid transition to a zero-emission economy. While there are many investors scouring the renewables area for too few exciting opportunities, there are too few investors able to identify what’s exciting in next-gen nuclear. Historically and increasingly with new technologies, nuclear bests fossil fuels on every metric that matters to humanity—low carbon/zero emissions, firm reliable energy, zero toxic air pollutants, low ecologic footprint, weather resilience, high fuel security, walk-away safety performance, quality job creation, scalable and manufactured designs that reduce construction risk and finance costs, flexible sizing and energy output options that can meet a broader array of energy needs. Providing abundant clean energy that does not pollute the environment but works together with renewables to help eliminate the need for fossil fuels while increasing energy access for all people of the world, is a compelling value proposition.
This is the quintessential question for those seeking to solve climate. Vinod Khosla, the famed venture capitalist, explained the rationale for why we need to make this investment when he wrote the following in a blog post entitled “Black Swan thesis of Energy transformation:”
“The looming twin challenges of climate change and energy production are too big to be tackled by known solutions and time-honored traditions. Incremental remedies are fine for incremental problems, but they are insufficient for monumental, potentially life-altering threats, which need to be approached with a disruptive mindset. There are 5 billion people coveting the energy-rich lifestyles currently enjoyed by 500 million people, mostly in the developed world. Incremental technology progress will not satisfy this craving. We need non-linear jumps in technologies – technological Black Swans! We can invent these future technologies.”
Here is another, more animated answer to the question of “Do we need nuclear?”
“Advanced nuclear” encompasses a very wide range of designs for ways to generate heat for electricity and includes: 1) Fission, which involves the splitting of large, fissile atoms; 2) Fusion, which involves fusing small atoms together under high pressure to generate heat; and 3) a still-indetermined type of nuclear reaction which involves a low-energy nuclear reaction (LENR). All advanced designs are working to get away from the “traditional” design, called the Light Water Reactor, which was just one of more than 50 initial designs that were proposed in the early days of nuclear energy. The light water reactor was a particular design optimized for use in nuclear submarines—which requires massive water cooling and high pressure—and it became the de facto standard when the Navy began to order the production of them and the NRC learned how to regulate them. This is the reason that all nuclear plants built to date have been sited near large bodies of water and require complex back-up systems, in case the primary water cooling system fails. Advanced nuclear gets away from needing extensive safety systems and allows the reactor to cool through natural physics, that work even with a complete loss of power and which simplifies the design and reduces the costs.
Rather than standardize around one design and size, many people expect that there will be a number of commercial designs that energy buyers will be able to select from. These designs will come initially from fission developers, and have a variety of styles, sizes, cooling configurations and fuel types. However all of them are looking to use modular designs and as much mass production as possible to help speed construction, reduce costs and enable users to start small but increase generation capacity as needed. This will help buyers in differing geographies and with different energy demand profiles to select the type of unit that works best for them. Some of these designs will be well-suited to extracting unused energy from spent nuclear fuel—which is widely called “nuclear waste” but from which only about 5% of the inherent energy has been used. This will reduce our stockpiles of this material, our costs of maintaining it and reduce the need to extract new minerals for use as fuel.
While nuclear innovation has been on the rebound for more than a decade, news from developers rarely gets covered by the mass media, so you may have to subscribe to an industry newsletter in order to stay abreast of what is going on. Additionally, there is something of a taboo among those who have been in the environmental movement a long time (which essentially covers about 90% of the leaders of large environmental groups), to never discuss positive developments for nuclear power.
There’s a lot of work being done around the world to try to commercialize advanced nuclear designs. While there’s nothing stopping this development process, there is a lot that slows it down: mostly access to capital; access to a limited number of specialized test facilities; and the still nascent capabilities of nuclear regulators to grapple with the specific safety features of new designs. Together, these factors make nuclear development a slower process but access to sufficient capital would help expedite the process considerably for most all ventures.
Advanced nuclear designs are now on track for demonstration units to be built mid-decade and sales commitments to begin being received by developers soon after, with commercial builds coming online in early 2030s. While it would be better if these designs were available now, by then, the demand will be even stronger, as the dire consequences of climate change will be impacting everyone and the urgency to end all fossil fuel extraction and use will be at its height.
Nuclear waste is functionally a non-issue, given that it is safely stored and impacts no one. No one has been hurt by nuclear’s waste, yet fossil fuels’ waste—carbon emissions—are heating our climate and causing massive amounts of death and destruction. That’s a really big waste issue but those who oppose nuclear power have successfully made the “management” of nuclear waste appear to be a huge issue by politicizing it. There may be political disagreements but there are no unsolved technological issues involved. We know how to store these metallic rods safely and have been doing it without any problem for more than sixty years. We also know that the inherent energy remaining in the spent fuel rods is a valuable energy source that could be extracted and used as energy. Some of the advanced nuclear designs coming out will be able to use nuclear waste. Others will extract valuable isotopes during their regular operations and use them to supply medical and industrial needs. Future nuclear waste streams should be a very small fraction of what we currently collect for more permanent, long-term storage using well-proven stable geologic storage sytems.
Of course, but that is the same for any new technology. No one has ever said that the high cost of the first prototyped iPhone means that there won’t be a market for the product. All technologies see declining costs as production increases. Advanced nuclear, because of its smaller sizes, will be able to travel down the cost curve much more quickly than the prior generation of power plants, each of which were distinctly different builds and were not designed for pre-fabrication or mass-production. Eventually, advanced nuclear power will be one of the lost-cost energy sources known to man but, in the interim, recent studies have shown that, even if nuclear power costs more initially, the existence of firm clean power on any grid will make the total cost of decarbonization of that grid cheaper.
We have about 10,000 years of nuclear fuel available from known Uranium resources. Experts have estimated that there is as much as 1,000 years of energy locked up in the unused fuel that remains in existing spent fuel rods. Decommissioning all nuclear weapons can supply perhaps several hundred years worth of power. Then there is Thorium, an even more abundant mineral resource that has been found in the earth on every continent, which can augment Uranium fuel supplies. The hydrogen resources needed to supply future fusion technologies is even more abundant and won’t require Uranium at all.
Fusion researchers are clearly making progress and are increasingly transitioning from research groups to development groups. This has raised expectations and leads many to believe that such efforts will lead to the successful production of “net energy” from fusion within the decade (more energy out than in). If that is the case, then that starts the clock on the next phase, which is working to design a system that can reliably produce usable electricity cost-effectively. Depending upon how “net energy” was achieved, that may be a relatively quick process. However, once that has been achieved, then these teams still need to design beta commercial implementations, test them and get manufacturing, testing and operator training systems designed and and built, which are themselves multi-year processes. Given very optimistic outlooks, we can hope fusion designs become reality within the next two to three decades and can begin to replace the aged power plants being built now that will be ready to retire then.
LENR is an exciting and yet still rather mysterious area of energy exploration that has eluded precise scientific definition. Once this area of science was called “cold fusion” and ran into problems with wildly unsupported claims that left the area discredited. Now, three decades along, scientisare still unable to definitely explain or dismiss a phenomena where, through a special mix of reactants and metals, a sudden burst of energy is triggered that has blown holes in lab benches and floors. Yet, there are more than 100 organizations engaged in this research and some $250 million has been raised to develop LENR technologies for a range of power applications.
There are dozens if not hundreds of initiatives that endeavor to help people learn the truth about nuclear energy. Unfortunately, there are likely as many sites trying to spread inaccurate information to keep people feeling afraid of nuclear, when the reality of nuclear is that it is a life and environment-enhancing technology. Reliable sources include:
- The Department of Energy: Office of Nuclear Energy
- The Nuclear Energy Institute: Fundamentals
- The International Energy Agency: Nuclear
- The Nuclear Innovation Alliance
- Nuclear Matters
- Clean Air Task Force: Advanced Nuclear Energy
- ClearPath: Nuclear
- Third Way: Climate & Energy
- The Breakthrough Institute: Energy
- Good Energy Collective
- Energy Impact Center
- University of Michigan: Fastest Path to Zero